Devgen nv announces its business and financial results for the year ending 31 December 2009
Zwijnaarde, March 11, 2010 -Regulated information
Strategic highlights
Throughout 2009 the global outlook for agricultural business remained positive.
Heat and drought spells have highlighted the global challenge of sustainable
food production. The food crisis of 2008 has enhanced political and corporate
interest in innovation in agriculture and has resulted in a re-appreciation of
agriculture and of the seed business in particular.
In India, the erratic and weak monsoon season of 2009 has had significant impact
on the economy and on the trade of food grains. Seeds delivering increased
yields under both normal and stress conditions are now globally recognized as
key drivers to meet the needs of society for feeding its growing population and
to bring prosperity to farmers.
During 2009, Devgen continued to implement its agro-biotech business plan to
become a leading biotech-seed player in 4 important crops (rice, sorghum, pearl
millet and sunflower) and a licensor of crop protection technology in other
crops:
· Devgen strengthened and expanded its direct market access for its seed
products in India, Indonesia and the Philippines.
· In India, the company achieved substantial revenue growth, expanded its
staff and infrastructure and extended its product portfolio in all 4 core crops.
· In the Philippines, Devgen initiated research, production, marketing and
sales and launched its first hybrid rice product for the tropical market.
· In Indonesia, key business relationships for production and distribution
were established and two hybrids were successfully registered.
· The company increased its advanced breeding efforts, research staff and
infrastructure to further strengthen its pipeline and product portfolio in
hybrid pearl millet, rice, sorghum and sunflower seeds.
· The company continued to expand its pipeline of biotech and non-biotech
traits focused on a-biotic and biotic stress resistance.
· Devgen and Monsanto updated their research and technology agreement,
against a payment of EUR 20 million to Devgen.
· Monsanto Company recently announced that it had moved a corn rootworm
trait based on RNAi technology from phase 1 to phase 2 in its pipeline.
In 2009, governments and regulators continued to restrict the use of certain
hazardous chemicals to control nematode pests on vegetables, fruits and row
crops. Anticipating on this trend, Devgen scientists have developed a nematicide
product with a superior environmental and worker exposure profile compared to
other nematicides, and which is equally efficacious in controlling nematode
pests. This product moved in 2009 to commercialization in Turkey and first sales
of Devguard(®) were realized.
In the US, commercialization of a different formulation, under the brand name
Enclosure(®), is targeted for 2010. Regulatory approvals in other countries were
pursued as planned.
Devgen significantly strengthened its cash position during 2009:
· 14.7 million euro raised in capital
· 20 million euro payment in fees from Monsanto Company.
Business highlights
Nematicide Business
· Devgen's nematicide was approved in Turkey for use on tomatoes,
cucumbers, peppers and eggplant. The product was launched under the brand name
Devguard(®) and is distributed by Devgen's partner in Turkey, Dogal A.S.
· The product is well received by farmers, especially because of its
environmental safety profile and its short pre-harvest interval which enables
growers to extend the treatment period without affecting export of their
products into zones with strict residue level controls.
· Devgen's nematicide was approved in the US for use on peanuts and is
targeted for launch under the brand name Enclosure(®) in the first half of 2010.
· Additional development is in progress to expand into other crop
opportunities.
· The approval procedures in other countries are further pursued with the
first ones expected in 2010-2011.
Seed business
Despite the impact of adverse weather on agriculture in India[1], Devgen's
hybrid seed business grew by close to 50 %, the strongest growth noted in the
industry:
· Sales value of hybrid rice seeds more than doubled and put Devgen
in the number 3 position in the Indian hybrid rice market. Devgen's hybrid rice
is well received by farmers because of its high yield, drought tolerance and
good grain taste when consumed.
· Sales of sunflower hybrid seeds increased by 19%, supported by the
launch of a new product, Frontline SH 491, which combines short maturation time
and high yield. Devgen is now also a top-3 player in this market segment in
India.
· Devgen regained its leadership position in India for sorghum
hybrids, thanks to 60% growth in Sales value. Devgen launched new products which
are superior over its own sorghum hybrid which is already market leader. Devgen
also made a strong entry into the sorghum fodder market.
· In pearl millet Devgen gained market share and increased sales by
50%. Mahalaxmi DB 5000, a new product targeted for the hot and dry regions of
India, was launched and should support future growth.
· Availability of good farmland for seed production is crucial in a
growing business. For next production season, Devgen has secured access to
considerably more area and with more geographically spread to mitigate
environmental crop production risks.
· A new seed processing plant was built and became operational. It
doubles Devgen's seed processing capacity.
· A dedicated smaller plant for processing parental seed, together
with cold storage facilities was built and provides secure high quality parental
seed management and processing.
· New laboratory infrastructure for Quality Control and R&D will be
commissioned shortly.
In 2009 Devgen established operations in the Philippines:
· A legal entity was incorporated with head office in Manila.
· A research station was set up to focus on the development of
tropical hybrids. A production team was put in place and initiated test
production on multiple locations. A first product is available for the dry
season sales and field locations were secured for the first large scale
production during the current dry season.
· A distribution partnership was set up with Leads Agri, a leading
supplier of agrochemical products in the Philippines with nationwide presence.
· The first rice hybrid, named Masuwerte®, bred for the Philippine
market was launched. Masuwerte® is a high yielding, long grain rice with good
aroma.
In Indonesia, Devgen is preparing to sell hybrid rice as of 2010:
· 2 rice hybrids that were extensively tested over the past 2 years,
obtained variety registration. Sales should start in early 2010.
· Devgen deepened its relationship with PT (Persero) Sang Hyang Seri
(SHS) through the creation of a Hybrid Rice Strategic Business Unit for hybrid
rice seed production. The companies are further building on their cooperation
for R&D and distribution of rice hybrids in Indonesia.
Technology
· Devgen's global breeding team, operating in Belgium, India, Kenya
and the Philippines has made important progress to deliver new products in the
short, medium and long term. Several new hybrids are targeted to be launched in
2010.
· The development of Devgen's proprietary biotech crop protection
technology continues. Monsanto Company recently announced that it had moved a
corn rootworm trait similar to such RNAi technology from phase 1 to phase 2 in
their pipeline.
· Devgen and Monsanto Company modified the scope of their research and
technology agreement signed in 2007. Monsanto Company now has broader rights to
Devgen technology. In exchange, Devgen received EUR 20 million in cash.
· In rice, Devgen advanced a portfolio of biotech and non-biotech
traits to protect plants against biotic and abiotic stress. These hybrids are
expected to fuel the Devgen pipeline in hybrid rice and are targeted to deliver
increased yield and prosperity to the Asian farmer.
· Devgen renewed its agrochemical compound discovery agreement with
Sumitomo Chemical Company, a Japan based company with which Devgen has been
collaborating under multiple agreements since 2001.
Business objectives 2010:
· Devgen's goal is to further grow and entrench its position as an
innovating provider of hybrid seeds in India and hybrid rice seed in S.E. Asia.
This can be achieved by increasing market access for its existing products and
by launching new high value products.
· Seed production and seed sales are highly influenced by weather
conditions. Based on the March 1(st) production update, Devgen anticipates
substantial revenue growth of its seed business. Devgen management will provide
a guidance update in mid-May, after completing the harvest of this year's seed
production. A second update will be given after the onset of the monsoon season.
· In the Philippines, the company plans to ramp-up sales of hybrid
rice seed.
· In Indonesia, Devgen aims to strengthen the organization and launch
its product successfully.
· Several new products will be launched in 2010 and others evaluated
for possible launch in 2011.
· The company targets to bring its first biotech traits for rice from
research to the development stage in India.
· Simultaneously new non-biotech hybrids are intended to be advanced
towards commercialization.
· Devgen plans to launch its nematicide in peanuts in the United
States, while progressing the path to product registration in Europe.
Financial highlights
Key figures 2009
------------------------------------------------+-------+-------+------+--------
|H1 2009|H2 2009|Y 2009| Y 2008
EUR 000 (except for earnings per share)| | | |
------------------------------------------------+-------+-------+------+--------
Revenue| 8,618| 9,817|18,435| 9,344
------------------------------------------------+-------+-------+------+--------
EBITDA| -3,615| -2,283|-5,898|-15,030
------------------------------------------------+-------+-------+------+--------
Operating Loss from continued operations| -4,645| 3,293|-7,938|-17,300
------------------------------------------------+-------+-------+------+--------
Net of financial income/cost| -339| -242| -581| 685
------------------------------------------------+-------+-------+------+--------
Net loss from continued operations| -4,985| -3,534|-8,519|-16,615
------------------------------------------------+-------+-------+------+--------
Basic earnings per share from continued| -0.28| -0.17| -0.45| -0.93
operations (EUR)| | | |
------------------------------------------------+-------+-------+------+--------
Net loss from discontinued operations| -162| 29| -133| -8,508
------------------------------------------------+-------+-------+------+--------
Net Loss for the year continued & discontinued| -5,147| -3,504|-8,651|-25,123
operations| | | |
------------------------------------------------+-------+-------+------+--------
Basic earnings per share from continued &| -0.29| -0.17| -0.46| -1.41
discontinued operations (EUR)| | | |
------------------------------------------------+-------+-------+------+--------
Cash and cash equivalents[2]| 36,173| 45,762|45,762| 24,218
------------------------------------------------+-------+-------+------+--------
· Revenues increased from ? 9.3 million in 2008 to ? 18.4 million in
2009, an increase with 97%.
· Earnings before amortization, interest and taxes (EBITDA) improved
from ? -15.0 million in 2008 to ? -5.9 million in 2009.
· Net loss for the year from continuing operations amounted to ? 8.5
million as compared to ? 16.6 million in 2008, a decrease with 49%.
· Net loss for the year from discontinued operations related to the
ceased Human Therapeutics business amounted to ? 0.1 million as compared to
? 8.5 million in 2008.
· Total net loss from continued and discontinued operations amounted to
? 8.7 million as compared to ? 25.1 million in 2008, a decrease with 66%.
· The cash position of the company increased from ? 24.2 million at year
end 2008 to ? 45.8 million at year end 2009 (including ? 5.6 million cash
restricted in its use).
Revenues
The company's revenues have been derived from product sales, research and
development partnerships and government grants.
-------------------------------------+--------+-------+--------
'000 of ? / year ended 31 December | 2009 | 2008 | 2007
-------------------------------------+--------+-------+--------
Sales of goods | 9,060 | 6,093 | 338
-------------------------------------+--------+-------+--------
Partnering income | 9,170 | 3,171 | 5,657
-------------------------------------+--------+-------+--------
Government grant income | 205 | 80 | 1,288
-------------------------------------+--------+-------+--------
Total revenues | 18,435 | 9,344 | 7,284
-------------------------------------+--------+-------+--------
Revenue from sales of goods amounted to ? 9.1 million in 2009. This is an
increase of 49% compared to ? 6.1 million achieved in 2008. Sales in 2009
include the product launch of Masuwerte(®) in the Philippines and of Devgen's
nematicide, sold under the brand name Devguard(®), in Turkey.
Partnering income increased from ? 3.2 million in 2008 to ? 9.2 million in 2009
as a result of the update of the research and technology agreement with Monsanto
Company and from the renewed collaboration with Sumitomo Chemical Company.
Government grant income amounted to ? 0.2 million in 2009 and is fully related
to an R&D grant from EDB (Economic Development Board, Singapore).
Gross profit
-------------------------------------+------------+---------+--------
'000 of ? / year ended 31 December | 2009 | 2008 | 2007
-------------------------------------+------------+---------+--------
Revenues | 18,435 | 9,344 | 7,284
-------------------------------------+------------+---------+--------
Including Sales of goods | 9,060 | 6,093 | 338
-------------------------------------+------------+---------+--------
Cost of goods sold | (5,942) | (4,170) | (390)
-------------------------------------+------------+---------+--------
Gross profit from sales of goods | 3,118 | 1,923 | (52)
-------------------------------------+------------+---------+--------
Total gross profit | 12,493 | 5,175 | 6,895
-------------------------------------+------------+---------+--------
Total gross profit increased from ? 5.2 million in 2008 to ? 12.5 million in
2009, an increase with ? 7.3 million. The gross profit from sales of goods
amounted to ? 3.1 million compared to ? 1.9 million in 2008, representing an
increase of 62%.
Operating expenses and other operating income
--------------------------------------+--------+--------+---------
'000 of ? / year ended 31 December | 2009 | 2008 | 2007
--------------------------------------+--------+--------+---------
R & D expenses | 10,086 | 14,422 | 10,793
--------------------------------------+--------+--------+---------
Marketing and distribution expenses | 4,315 | 2,381 | 91
--------------------------------------+--------+--------+---------
General and administrative expenses | 6,289 | 5,937 | 5,093
--------------------------------------+--------+--------+---------
Other operating income | (259) | (266) | (212)
--------------------------------------+--------+--------+---------
Total operating costs | 20,431 | 22,474 | 15,765
--------------------------------------+--------+--------+---------
Research and development expenses amounted to ? 10.1 million, decreasing with ?
4.3 million or 30% compared to last year. Lower expenses in the nematicide
program, which enters into the pre-commercialization phase, were partially
offset by higher R&D expenses into the rice breeding programs in support of the
further expansion of the seed business.
Marketing and distribution expenses amounted to ? 4.3 million in 2009 as
compared to ? 2.4 million in 2008 and fully relate to the efforts made to grow
Devgen's seed and nematicide business.
General and administrative expenses in 2009 show an increase of ? 0.3 million or
6% and amount to ? 6.3 million. This increase is in line with Devgen's
geographic and business expansion.
Other operating income, mainly related to rent income and sales of thrash seed,
remained stable at ? 0.3 million.
Net results
The net loss from continuing and discontinued operations in 2009 amounted to
? 8.7 million as compared ? 25.1 million in 2008, a decrease with ? 16.5 million
or 66%. The result in 2009 has been impacted by substantially increased contract
income and strong growth of seed sales, combined with lower operational expenses
and the impact of the termination of the Human Therapeutics business unit on the
R&D expenses.
Cash flow
Cash provided by operations in 2009 amounted to ? 10.8 million, as compared to
cash used in operations of ? 18 million in 2008. The net operating cash drain
(operating loss + amortization and depreciations + share based compensation) of
? 5.2 million was offset by ? 16.0 million improvement in working capital mainly
relating to cash received in advance from Monsanto (? 20 million received at the
end of April 2009 and resulting in a positive net working capital effect of ?
14.6 million at December 31, 2009 as income is recognized at ? 667 ('000) per
month until the end of the related contract period) and to the company's advance
booking incentive scheme for the Indian seed business resulting in early
collections for next season's seed sales for amount close to ? 3 million.
Cash used by investing activities amounted to ? 1.2 million in 2009 as compared
to cash provided by investing activities of ? 5 million in 2008.
In 2009, investments in property, plant and equipment amounted to ? 1.7 million,
partially offset by the sale of equipment and by interest received from cash
investments. In 2008 the sale of financial assets held for trading resulted in
cash provided by investing activities of ? 5 million.
Cash provided by financing activities amounted to ? 12.8 million in 2009 as
compared to cash used in financing activities of ? 0.7 million in 2008. The cash
flow in 2009 included the net proceeds from capital increases of ? 14.1 million
as compared to ? 0.1 million in 2008, and the net payments for financial debt of
? 1.3 million in 2009 as compared to ? 0.7 million in 2008.
As a result of the above cash flows, a net increase of ? 21.5 million in cash
and cash equivalents was recorded during 2009. Devgen's cash and cash
equivalents, including restricted cash of ? 5.6 million, amounted to ? 45.8
million on 31 December 2009, as compared to ? 24.2 million on 31 December 2008.
Balance sheet
The balance sheet at 31 December 2009 has a solvency ratio (equity vs. total
assets) of 59 % (versus 71% at 31 December 2008). The balance sheet shows total
assets and liabilities for an amount of ? 80.1 million, an increase of 40%. The
stronger cash position at the assets side is compensated by the increase of the
share premium account (capital increase) and the deferred income account
(payment by Monsanto Company).
Segment reporting
The results of the company are reported under one single "agro" segment.
Staffing
Per December 2009, Devgen employed 283 members of staff, an increase of 30 %
compared to last year. Devgen is further strengthening its organization in India
and in South-East Asia. In Belgium Devgen employs 54 employees forming the core
research team and the business support unit responsible for global coordination,
legal and regulatory affairs, intellectual property management, IT, finance,
investor relations and HR.
Corporate highlights
In 2009 two new board members joined Devgen's board. Gengest BVBA, represented
by Mr. Rudi Mariën and Mr. Orlando de Ponti both joined on June 2, 2009.
Financial outlook 2010
· Devgen anticipates overall revenue growth of 35 to 40%.
· R&D remains a key factor in the development of Devgen's future. Investment in
R&D excluding depreciation is set at ? 10 million to allow Devgen to
continuously build on its pipeline of biotech and non biotech seeds.
· Cash Burn for the year including planned investments is estimated at ? 15
million.
Conference call and webcast
Devgen will conduct a conference call on Thursday, March 11, 2010 at 11 am which
will also be simultaneously broadcasted via internet. The event is open to the
public and is accessible via www.devgen.com and via
telephone at +32 (0)2 290 14 07. To ask questions during the Q&A session, please
join the event via telephone 10 minutes prior to the start of the conference
call. A recording of the event will also be made available at www.devgen.com
shortly after the call.
Financial calendar
------------------------------------+-------------------------------------------
May 17, 2010 |Business update H1 2010
------------------------------------+-------------------------------------------
June 1, 2010 |Annual Shareholders' Meeting at Devgen's
|offices
------------------------------------+-------------------------------------------
August 25, 2010 |H1 2010 Results
------------------------------------+-------------------------------------------
November 16, 2009 |Business update H2 2010
------------------------------------+-------------------------------------------
Financial statements
More complete financial statements for 2009 are available for downloading in the
investor section of www.devgen.com .
Auditor's report
The auditor has confirmed that he has accomplished substantially all of the
audit work and that, as a result of the audit, no meaningful corrections need to
be applied to the financial information as included in this press release.
The Statutory Auditor
DELOITTE BEDRIJFSREVISOREN
Represented by Gert Vanhees and Gino Desmet
About Devgen nv
Devgen's mission is to enable farmers to sustainably grow more food on less
land, with less water, agrochemicals and labour.
Devgen uses advanced biotechnology and molecular breeding technology to make
high yielding seeds and crop protection solutions with a superior environmental
profile.
Devgen brings this technology to the market in the world's major food and feed
crops through two complementary strategies:
· Licensing Devgen technology for use in corn, cotton and soy and selected
other crops in exchange for R&D funding, and milestone and royalty payments.
· Producing and selling its premium hybrid seeds in major field crops such
as rice, sunflower, sorghum, and pearl millet, in the Indian subcontinent and
South-East Asia.
In its Crop Protection unit, Devgen developed and has taken to market a novel
nematicide, an agro-chemical product that protects crops from damage by
parasitic nematodes.
Incorporated in 1997, Devgen has offices in Ghent (Belgium), Singapore,
Hyderabad (India), General Santos (The Philippines) and Delaware (US) and
employs today more than 280 people.
For more information please contact:
Thierry Bogaert, CEO Wim Goemaere, CFO
Tel. +32 9 324 24 24 Tel. +32 9 324 24 24
Thierry.Bogaert@devgen.com Wim.Goemaere@devgen.com
This press release may contain forward-looking statements containing the words
"anticipates", "expects" , "intends", "plans", "estimates", "may" and
"continues" as well as similar expressions. Such forward looking statements may
involve known and unknown risks, uncertainties and other factors which might
cause the actual results, performance or achievements of Devgen to be materially
different from any future results or achievements expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, among others: agricultural risks and difficulties,
including weather factors, diseases and pests, the costs and requirements of
regulatory compliance and the speed with which approvals are received; public
acceptance of biotechnology products; political, economic and social
developments in countries where Devgen operates and other risks and factors
detailed in the company's most recent annual report.
These forward looking statements speak only as of the date of publication of
this document. Devgen disclaims any obligation to update such forward looking
statements in this document to reflect any change in its expectations,
conditions or circumstances on which such statement is based, unless required by
law or regulation. This document does not constitute, or form part of, any offer
or invitation to sell or issue, or any solicitation of any offer, to purchase or
subscribe for any securities issued by Devgen nv.
--------------------------------------------------------------------------------
[1] The Reserve Bank of India (RBI) said the agriculture growth will be muted
this fiscal year on account of the impact of poor monsoon on Kharif crops. The
total rice area during the Kharif season is estimated to have declined by 14% to
some 35 million Ha. A late start of the monsoon resulted in delayed plantings
and/or made farmers switch to other crops.
[2] Including restricted cash for an amount of EUR 5.6 million as per December
31, 2009.
[HUG#1392786]
PR ENG FINAL: http://hugin.info/135721/R/1392786/350224.pdf
